China wants to open major Arctic shipping route

China’s state news agency Xinhua reported last month that a Chinese ship had conducted a successful test of a trading route along the Arctic Northwest Passage. The announcement from Beijing confused the Canadians who claim sovereignty over the waters transited by the Xue Long. The Globe and Mail reported that the Canadian government thought the the Snow Dragon was on scientific research trip along with the Canadian scientists who were also on board.

The Xue Long (or Snow Dragon) traveled for 2,300 nautical miles through waters claimed by Canada for eight days. Xinhua proclaimed the voyage and would provide “a wealth of navigation experience” for future Chinese ships.

In recent years, the continued disappearance of Arctic sea ice has fueled projections for the Arctic as a new international trade route.

For China, the Northwest Passage could become a new notch in its multibillion-dollar logistics program known as the Belt and Road Initiative. The appeal includes the shortening of trade routes between China and North America. A Shanghai-to-New York route , for example, stretches 10,500 nautical miles through the Suez Canal. The Northwest Passage would cut that route by nearly 2,000 nautical miles and seven days of transit time.

Sending cargo from East Asia to the U.S. East Coast via the Suez Canal, a sea-level canal in Egypt with no locks or pinch points that can take the larger post-Panamax vessels. The Suez saw its share of traffic representing trade between Asia (including Southeast Asia) and the U.S. East Coast rise from 30% in 2010 to 42% by October 2013. However, shipping cargo from Shanghai to New York this way takes nearly 28 days; a vessel taking the Suez route will make 4.7 round trips yearly (77 days per trip), vs. 6.5 round trips annually (56 days per trip) through the Panama Canal. Costs can also add up quickly; once the Panama Canal allows post-Panamax containership transits, the Panama route will save 23% on total transportation costs vs. the Suez Canal route.

An Arctic route would probably take 20-26 days to go from China to the US East Coast. It would be faster and cheaper.

The Suez poses a credible threat to the Panamanian business in some cases. Maersk, for example, stopped shipping through Panama and only sends ships through its Egyptian competitor. There is talk of a “Suezmax” ship – which can carry up to 18,000 TEUs – becoming the global standard one day, which could cause a similar problem all over again.If manufacturing continues to move from China to Southeast Asian countries, whose ports are closer to the Suez, the route’s relevance will likely grow as global sourcing patterns change.

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